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Do you know exactly how much your real wage going up or not? Can the unemployment...

Do you know exactly how much your real wage going up or not?
Can the unemployment rate go up while the economy improves?

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Answer #1

The real wage is simply the nominal wage deflated by the inflation index. Thus how much the real wage is changing will depend on how much the nominal wage is changing relative to the price level. The greater the nominal wage change and the slower the inflation index the larger the change in the real wage.

An improving economy will mean a rising price level and also a rising rate of economic growth. However, unemployment can increase with an improving economy. This is called stagflation. This is experienced as the price level rises firms can cut back on their levels of employment and this raises the level of unemployment.

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